Slide international business 6e by CHarless hill 07IBChapter 01

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.. International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.. Inte

Chapter One

Globalization

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Opening Case: The Globalization of

Health Care

• There is a shortage of

radiologists in the United States and demand for their services is growing twice as fast as the rate of graduation

• Solution to the problem:

Send images over the Internet to be interpreted by radiologists in India

Opening Case: The Globalization of

Health Care

• Outsourcing health care is not only limited to

radiology; we are beginning to see patients travel

internationally for treatments as well as surgery

• In 2004 some 170,000 foreigners visited India for

medical treatments; the number is expected to grow at

15% for the next several years

• Question: Will demand for American health services

soon collapse as work moves offshore to places like

India?

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

What is Globalization?

• The shift toward a more integrated and

interdependent world economy

• Two components:

- The globalization of markets

- The globalization of production

Globalization of Markets

• The merging of distinctly

separate national markets into a global marketplace

- Falling barriers to cross-border

trade have made it easier to sell internationally

- Tastes and preferences converge

onto a global norm

- Firms offer standardized products

worldwide creating a world market

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Globalization of Markets

• Difficulties that arise from the globalization of markets

- Significant differences still exist among national markets

- Country-specific marketing strategies

- Varied product mix

Globalization of Markets

• The most global markets

are not consumer

markets

• The most global markets

are for industrial goods

and materials that serve a

universal need the world

over

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Globalization of Production

• Refers to sourcing of goods and services from

locations around the world to take advantage of

- Differences in cost or quality of the factors of production

• Labor

• Capital

Globalization of Production

• Historically this has been primarily confined to

manufacturing enterprises

• Increasingly companies are taking advantage of

modern communications technology, and particularly

the Internet, to outsource service activities to low-cost

producers in other nations

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Globalization of Production

• Outsourcing of productive activities to different

suppliers results in the creation of products that are

global in nature

• Impediments to the globalization of production include

- Formal and informal barriers to trade

- Barriers to foreign direct investment

- Transportation costs

- Issues associated with economic risk

- Issues associated with political risk

The Emergence of Global Institutions

• Globalization has created the need for institutions to

help manage, regulate and police the global

- Decline in barriers to the free flow of goods, services, and

capital that has occurred since the end of World War II

- Technological change

Declining Trade and Investment

Barriers

• During the 1920s and ‘30s, many of the nation-states

of the world erected formidable barriers to

international trade and foreign direct investment

• Advanced industrial nations of the West committed

themselves after World War II to removing barriers to

the free flow of goods, services, and capital between

nations

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Average Tariff Rates on Manufactured

Growth Trends

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Affects of Lowering Trade Barriers

The Role of Technology

• Lowering of trade barriers

made globalization possible;

technology has made it a

reality

• Since the end of World War

II the world has seen

advances in

- Communication

- Information processing

- Transportation technology

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Internet Usage Growth

The Changing Demographics of the

Global Economy

• World output and trade

• Changing foreign direct investment

• Changing nature of multinationals

International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

The Globalization Debate

- Lower prices for goods and

services

- Economic growth stimulation

- Increase in consumer income

- Creates jobs

- Countries specialize in production of goods and services that are produced most efficiently

- Companies move to countries with fewer labor and environment

regulations

- Loss of sovereignty

Managing in the Global Marketplace

• Much of this book is concerned with the challenges of managing

an international business (any firm that engages in international

trade or investment)

• Managing an international business is different from managing a

purely domestic business in four areas:

- Countries are different

- Range of problems confronted by a manager in an international business

is wider and the problems themselves are more complex than those confronted by a manager in a domestic business

- An international business must find ways to work within the limits imposed

by government intervention in the international trade and investment system

- International transactions involve converting money into different

currencies